Friday, December 12, 2008

White House May Bail Out Detroit

(Special thanks to Detroit's Own Bob Seger)

While Detroit burns, will the White House let Wall Street fiddle? Will Goldman Sachs alum, U.S. Department of the Treasury, Uncle Hank and Friends, come to the rescue? Come to Papa.

After last night’s announcement that the
$14-billion emergency bailout for U.S. automakers collapsed in the Senate when the United Auto Workers union refused to accede to Republican demands for swift wage cuts, speculation today that the White House may tap Wall Street bailout funds to avert a “body blow” to the auto industry could be the next step. Congress, after all, can only amuse for so long until the man with the money, Hank Paulson, steps in.

Treasury spokeswoman Brooke McLaughlin said,

"Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry."

In the meantime, Silicon Valley Venture capital firm Kleiner Perkins et al, along with an investor from Doha, QIA, has invested in luxury hybrid car manufacturer, Fisker Automotive, which has recently opened up shop in Pontiac, MI. Detroit area resident Citizen Carrie of Carrie’s Nation chronicles the Rustbelt’s emergence of Fisker here. KP has also recently announced a $75 M round in smart grid start-up Silver Spring Networks, as discussed in this Red Herring article.

More Congress kabuki…On the failure of Congress to act on the auto bailout, Democrats immediately sought to blame Republicans for the failure to aid Detroit, while a number of Republicans quickly blamed the union. But on all sides
the usual zest for political jousting seemed absent given the grim economic outlook. Whether the failure to approve a Detroit bailout was purely bipartisan or driven by personal ambition, Nancy Pelosi had this to say about a few Senators:

“Senate Republicans’ refusal to support the bipartisan legislation passed by the House and negotiated in good faith with the White House, the Senate and the automakers is irresponsible, especially at a time of economic hardship,” Ms. Pelosi said in a statement.
She added: “The consequences of the Senate Republican’ failure to act could be devastating to our economy, detrimental to workers, and destructive to the American automobile industry unless the President immediately directs Secretary Paulson to explore other short-term financial assistance options. Senator George V. Voinovich, Republican of Ohio, and a supporter of the auto rescue efforts, said: “I think it might be time for the president to step in.”

Although several Democrats were opposed to the bailout, the GOP in particular was hard nosed against union workers. "We were about three words away from a deal," said Senator Bob Corker of Tennessee, the GOP's point man in the negotiations, referring to any date in 2009 on which the UAW would accept wage cuts that would approximate those of foreign car manufacturers. Senator Corker's plan (which Senator McConnell seems to support) calls for lowering American autoworkers' pay to the same levels as workers of Nissan's, Toyota's and Honda’s U.S. employees. Note that Japanese automaker Toyota has a huge plant in Kentucky, which also happens to be Senator McConnell's state.

Another European automaker, Volkswagen
is building a $1 billion plant in Tennessee, which happens to be Senator Corker's state (and home state of Kleiner Perkins et al’s Al Gore, for what that’s worth.)

Despite the fact that
cutting executive pay would save jobs, the GOP went after the workers, instead. Senator McConnell has been a Washington wheeler and dealer for nearly 25 years and knows which end is up. Neither is he na├»ve, as back in October when he voted to hand over $350 billion in taxpayer money to Wall Street executives with no strings attached. BTW, these are the same executives who had shamelessly driven their companies and our country’s economy into the lake.

At the very least, it certainly would appear that Senators Corker and McConnell and a few insider corporate cronies and constituents close to home might have an interest in seeing the Rustbelt’s auto industry drive into a brick wall like an old Pacer traveling at ninety-five mph without brakes.

Why were both of these GOP senators so apt to turn a blind eye on regulating Wall Street firms that handily took $350 billion in taxpayer money only to hard-line the U.S. automakers in lending a measly $14 billion? These ‘thought leaders’ people who make corporate spending decisions are far more interested in lining shareholder dollars into their own pockets
than in rescuing America’s dying economy. If the carmakers, for example, GM, were left to disperse their assets, would the high-end Fisker’s Karma and the mid-range GM Volt’s comparable technologies be a good place to forge an “eco-chic” clean tech marriage and kick off the New Green Engine revolution in the Rustbelt?



Citizen Carrie said...

John McElroy, whom I would classify as a Big 3 shill, is of the opinion that the southern Senators are worried about the Employee Free Choice Act, which is proposed legislation that would make it easier to "unionize the transplants".

McElroy claims that the Senators are worried that Obama could sign this Act into law next year, and that the Senators want to weaken the UAW as much as they can before that happens. (Actually, the business community is shaking in their boots at the thought of this law passing, and, often pointed to this piece of legislation as a main reason not to vote for Obama.)

I can't imagine Obama doing anything to strengthen the unions, (even though he came out in support of the Act, and, I believe, was a co-sponsor), but otherwise, I don't see any obvious flaws in McElroy's theory.

2Truthy said...

CC, Thanks for the link to McElroy's comments on the So. Senators and Barry's support of the EFCA. Makes sense -- the "SV Way" has been to prohibit unionization (IT, CS, and Engineering)so the emergence of the SV players, starting with KP backed Fisker, would predictably have no room for a UAW model. Why should they? Granholm has already greased the skids for the MI university system to recruit cheap foreign students and mold them into the neo-green collar workers that we keep reading so much about.